Microsoft Special

Vendor to offer SMB customers special financing for licensing

Microsoft plans to offer small-business customers a special financing deal to entice them to sign up for its upcoming annuity-based software licensing program.

Called the Open Annuity Financing program, the deal will offer 7.9 percent financing for software orders totaling more than $2,000, said sources familiar with the program, which was detailed at Microsoft's Top VAR Summit in Scottsdale, Ariz., last week.

The special financing deal, for Microsoft's Open License 6.0 volume discount program, is available from April 1 through July 31 and is being offered in conjunction with financial services firm Household Finance and resellers, the sources said.

Open License 6.0 is the small-business offering in Microsoft's controversial License 6.0 annuity-based licensing model. License 6.0 was unveiled in early October. Microsoft then immediately moved to extend the transition period to the new program,and its annuity-based Software Assurance upgrade and maintenance plan,to July 31.

Some solution providers expressed mixed feelings about the special financing deal. "I don't think it will make any difference. It is rare to find a customer that is price-sensitive enough to license acquisition that they would even ask about financing," said Michael Cocanower, president of ITSynergy, Phoenix.

"I don't think customers view purchasing [under the existing Upgrade Advantage [program as any different than in the old days," he said. "It's going to be a shock to them. If nothing else, it does offer some advantages in that it is causing many companies to contact certified partners to get the skinny on what's going on."

Microsoft declined to comment on the Open Annuity Financing program. However, a Microsoft spokeswoman said the deal "only represents a change in payment options" and that it "is not a change to the [annuity-based licensing program per se."

Industry observers said the special financing deal reflects a move by Microsoft to soften complaints from small-business customers, many of which view the annuity-based licensing plan as a "tax."

"Customers see this much like income tax: They don't want to pay it in the first place, and the process is incredibly painful," said Rob Enderle, an analyst at research firm Giga Information Group. "The SMB market, much like the enterprise market, is looking more at reducing their commitment to the company."

Drew Brousseau, an analyst at Wall Street investment firm SG Cowen, said Microsoft's new annuity-based licensing scheme will cost customers more. "In the past, if you owned Microsoft software and wanted to get the next version, you could buy that at a discount. And now you can't," he said. He believes many clients won't sign up for Software Assurance or switch to a new platform soon. "Customers won't go to alternative platforms, but they will simply elongate their upgrade cycles."